July 25, 2014

The (Vain?) Search for 3 Percent 2Q14 GDP Growth

Filed under: Economy,Taxes & Government — Tom @ 10:04 pm

Today’s durable goods report showed that the seasonally adjusted value of June shipments rose 0.1%.

Knowing orders is useful for gauging the future, but what goes into GDP is what is shipped/sold. This quarter’s rundown was +0.1% April, -0.1% May, and +0.1% June — before inflation, which was certainly greater than the 0.1% sum of the three months.

Meanwhile, over in consumer spending land, the markets were spooked by Amazon’s larger than expeted second quarter loss, its much larger forecast loss in the third quarter, and Visa’s weak second quarter.

Meanwhile monthly new-home sales have trailed the same month froma year for four out of the past five months.

So where is this 3 percent GDP growth going to come from?



  1. So where is this 3 percent GDP growth going to come from?

    Short answer – a massive downward revision to prior quarters’ data.

    Longer answer – it’s not coming from anywhere else judging by the monthly releases of key data:

    - Personal spending for the 2nd quarter is expected to go up by 0.6% (after the expected June +0.4% expected increase due in Friday’s report on personal income), with core PCE inflation also going up by 0.6%. In the 1st quarter, the monthly products of the changes came to +1.7% (deflated to +1.3% using reported monthly core PCE inflation).

    - Retail sales went down from a +1.6% increase in Q1 to a +1.2% increase in Q2 (with a serious and unexpected drop in June, which should put a crimp in the expected June personal consumptions increase mentioned above).

    - Industrial production went down from +1.9% in Q1 to +0.4% in Q2.

    - The trade deficit went from $125.4B in Q1 ($41.8B/month) to $91.4B in the first 2 months of Q2 ($45.7B/month), and is on track to be in the $135B-$140B range.

    Comment by steveegg — July 26, 2014 @ 12:29 pm

  2. Government spending on housing, feeding, clothing and medical care of illegal aliens? It’s a double digit growth industry you know.

    Comment by dscott — July 27, 2014 @ 8:37 am

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